BRUSSELS – Investors managing €6.6 trillion in assets have urged the European Union to avoid weakening its sustainability regulations as the EU plans to simplify green finance rules. The European Commission is set to publish a proposal this month aimed at easing reporting requirements under sustainability policies that some businesses have found overly complex.
Investor groups, including the Institutional Investors Group on Climate Change, the European Sustainable Investment Forum, and the Principles for Responsible Investment, expressed concern that significantly revising the rules could hinder investment in industries that Europe is striving to attract. They argued that reopening the regulations could create uncertainty and jeopardize the Commission’s goal of aligning capital with the European Green Deal.
The European Commission intends to simplify several aspects of its sustainability framework, including corporate sustainability reporting, due diligence rules related to human rights and environmental issues in supply chains, and a classification system for climate-friendly investments. The move aims to address concerns raised by industries about regulatory burdens, while also countering the deregulatory stance of the U.S. administration.
EU officials have indicated that the proposed changes will mainly focus on easing the reporting requirements for small businesses. However, some member states, including Germany and France, advocate for further measures, including delaying the implementation of the regulation.
Leo Donnachie, senior policy manager at IIGCC, warned that reducing access to sustainability data could hinder investment decisions, particularly as Europe competes with China and the U.S. in clean technologies. Investors rely on this information to guide their choices in sustainable investments.
On the other hand, some industry representatives argue that the current data requirements place an excessive bureaucratic burden on businesses. Patricia Volhard, head of European Funds Regulatory practice at the law firm Debevoise & Plimpton, highlighted the challenges posed by these obligations.
Former European Central Bank President Mario Draghi has emphasized that the EU requires up to €800 billion in annual investments to remain competitive with other global economies.
Donnachie emphasized that while technical aspects of sustainability rules could be streamlined, delaying or overhauling the regulations could create instability and hinder progress toward long-term sustainability goals.
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